India eyes long-term fert and intermediate imports

26 June 2008 18:29[Source: ICIS news]

NEW DELHI (ICIS news)--?xml:namespace>Indiawill encourage companies to enter into long-term contracts for THE import of fertilizers and intermediates at cheaper prices under a revised subsidy scheme for decontrolled fertilizers, it said on Thursday.

The Cabinet Committee on Economic Affairs (CCEA) approved the revised subsidy scheme and decided to put domestic diammonium phosphate (DAP) at par with import levels for calculation of ad hoc subsidy, which is known as price concession in official parlance.

According to an industry source, this decision and related favourable decisions on pricing of phosphoric acid and ammonia would encourage domestic DAP units to improve capacity utilisation and ramp up capacity.

To encourage long-term imports, the government has introduced “outlier concept” for calculating subsidies by excluding cases where the price of imported product or intermediate is lower by 5% or $30/tonne than the industry average price.

The difference between the average price and the outlier’s price would be shared by the company concerned with the government, which wants to share the benefit accruing from lower-priced imports with the importers that clinch long-term deal, on a 65:35 basis.

The government claimed that the revised subsidy scheme would help reduce fertilizer subsidy by Indian rupees (Rs) 11.63bn ($273m) in a full year through introduction of the revised methodology.

The revised scheme would be introduced with retrospective effect from 1 April 2008 for DAP, potassium fertilizers and NPK complex fertilizers.